Meeting With Adnan Khashoggi?
By Seymour M. Hersh
The New Yorker
3-11-3

At the peak of his deal-making activities, in the nineteen-seventies,
the Saudi-born businessman Adnan Khashoggi brokered billions of dollars
in arms and aircraft sales for the Saudi royal family, earning hundreds
of millions in commissions and fees. Though never convicted of wrongdoing,
he was repeatedly involved in disputes with federal prosecutors and with
the Securities and Exchange Commission, and in recent years he has been
in litigation in Thailand and Los Angeles, among other places, concerning
allegations of stock manipulation and fraud. During the Reagan Administration,
Khashoggi was one of the middlemen between Oliver North, in the White House,
and the mullahs in Iran in what became known as the Iran-Contra scandal.
Khashoggi subsequently claimed that he lost ten million dollars that he
had put up to obtain embargoed weapons for Iran which were to be bartered
(with Presidential approval) for American hostages. The scandals of those
times seemed to feed off each other: a congressional investigation revealed
that Khashoggi had borrowed much of the money for the weapons from the
Bank of Credit and Commerce International (B.C.C.I.), whose collapse, in
1991, defrauded thousands of depositors and led to years of inquiry and
litigation.

Khashoggi is still brokering. In January of this year,
he arranged a private lunch, in France, to bring together Harb Saleh al-Zuhair,
a Saudi industrialist whose family fortune includes extensive holdings
in construction, electronics, and engineering companies throughout the
Middle East, and Richard N. Perle, the chairman of the Defense Policy Board,
who is one of the most outspoken and influential American advocates of
war with Iraq.

The Defense Policy Board is a Defense Department advisory
group composed primarily of highly respected former government officials,
retired military officers, and academics. Its members, who serve without
pay, include former national-security advisers, Secretaries of Defense,
and heads of the C.I.A. The board meets several times a year at the Pentagon
to review and assess the country's strategic defense policies.

Perle is also a managing partner in a venture-capital
company called Trireme Partners L.P., which was registered in November,
2001, in Delaware. Trireme' s main business, according to a two-page letter
that one of its representatives sent to Khashoggi last November, is to
invest in companies dealing in technology, goods, and services that are
of value to homeland security and defense. The letter argued that the fear
of terrorism would increase the demand for such products in Europe and
in countries like Saudi Arabia and Singapore.

The letter mentioned the firm's government connections
prominently: "Three of Trireme's Management Group members currently
advise the U.S. Secretary of Defense by serving on the U.S. Defense Policy
Board, and one of Trireme's principals, Richard Perle, is chairman of that
Board." The two other policy-board members associated with Trireme
are Henry Kissinger, the former Secretary of State (who is, in fact, only
a member of Trireme's advisory group and is not involved in its management),
and Gerald Hillman, an investor and a close business associate of Perle's
who handles matters in Trireme's New York office. The letter said that
forty-five million dollars had already been raised, including twenty million
dollars from Boeing; the purpose, clearly, was to attract more investors,
such as Khashoggi and Zuhair.

Perle served as a foreign-policy adviser in George W.
Bush's Presidential campaign-he had been an Assistant Secretary of Defense
under Ronald Reagan-but he chose not to take a senior position in the Administration.
In mid-2001, however, he accepted an offer from Secretary of Defense Donald
Rumsfeld to chair the Defense Policy Board, a then obscure group that had
been created by the Defense Department in 1985. Its members (there are
around thirty of them) may be outside the government, but they have access
to classified information and to senior policymakers, and give advice not
only on strategic policy but also on such matters as weapons procurement.
Most of the board's proceedings are confidential.

As chairman of the board, Perle is considered to be a
special government employee and therefore subject to a federal Code of
Conduct. Those rules bar a special employee from participating in an official
capacity in any matter in which he has a financial interest. "One
of the general rules is that you don't take advantage of your federal position
to help yourself financially in any way," a former government attorney
who helped formulate the Code of Conduct told me. The point, the attorney
added, is to "protect government processes from actual or apparent
conflicts."

Advisory groups like the Defense Policy Board enable
knowledgeable people outside government to bring their skills and expertise
to bear, in confidence, on key policy issues. Because such experts are
often tied to the defense industry, however, there are inevitable conflicts.
One board member told me that most members are active in finance and business,
and on at least one occasion a member has left a meeting when a military
or an intelligence product in which he has an active interest has come
under discussion.

Four members of the Defense Policy Board told me that
the board, which met most recently on February 27th and 28th, had not been
informed of Perle's involvement in Trireme. One board member, upon being
told of Trireme and Perle's meeting with Khashoggi, exclaimed, "Oh,
get out of here. He's the chairman! If you had a story about me setting
up a company for homeland security, and I've put people on the board with
whom I'm doing that business, I'd be had"-a reference to Gerald Hillman,
who had almost no senior policy or military experience in government before
being offered a post on the policy board. "Seems to me this is at
the edge of or off the ethical charts. I think it would stink to high heaven."

Hillman, a former McKinsey consultant, stunned at least
one board member at the February meeting when he raised questions about
the validity of Iraq's existing oil contracts. "Hillman said the old
contracts are bad news; he said we should kick out the Russians and the
French," the board member told me. "This was a serious conversation.
We'd become the brokers. Then we'd be selling futures in the Iraqi oil
company. I said to myself, 'Oh, man. Don't go down that road.'" Hillman
denies making such statements at the meeting.

Larry Noble, the executive director of the Washington-based
Center for Responsive Politics, a nonprofit research organization, said
of Perle's Trireme involvement, "It's not illegal, but it presents
an appearance of a conflict. It's enough to raise questions about the advice
he's giving to the Pentagon and why people in business are dealing with
him." Noble added, "The question is whether he's trading off
his advisory-committee relationship. If it's a selling point for the firm
he's involved with, that means he's a closer-the guy you bring in who doesn't
have to talk about money, but he's the reason you're doing the deal."

Perle's association with Trireme was not his first exposure
to the link between high finance and high-level politics. He was born in
New York City, graduated from the University of Southern California in
1964, and spent a decade in Senate-staff jobs before leaving government
in 1980, to work for a military-consulting firm. The next year, he was
back in government, as Assistant Secretary of Defense. In 1983, he was
the subject of a New York Times investigation into an allegation that he
recommended that the Army buy weapons from an Israeli company from whose
owners he had, two years earlier, accepted a fifty-thousand-dollar fee.
Perle later acknowledged that he had accepted the fee, but vigorously denied
any wrongdoing. He had not recused himself in the matter, he explained,
because the fee was for work he had done before he took the Defense Department
job. He added, "The ultimate issue, of course, was a question of procurement,
and I am not a procurement officer." He was never officially accused
of any ethical violations in the matter. Perle served in the Pentagon until
1987 and then became deeply involved in the lobbying and business worlds.
Among other corporate commitments, he now serves as a director of a company
doing business with the federal government: the Autonomy Corporation, a
British firm that recently won a major federal contract in homeland security.
When I asked him about that contract, Perle told me that there was no possible
conflict, because the contract was obtained through competitive bidding,
and "I never talked to anybody about it."

Under Perle's leadership, the policy board has become
increasingly influential. He has used it as a bully pulpit, from which
to advocate the overthrow of Saddam Hussein and the use of premptive military
action to combat terrorism. Perle had many allies for this approach, such
as Paul Wolfowitz, the Deputy Secretary of Defense, but there was intense
resistance throughout the bureaucracy-most notably at the State Department.
Premption has since emerged as the overriding idea behind the Administration's
foreign policy. One former high-level intelligence official spoke with
awe of Perle' s ability to "radically change government policy"
even though he is a private citizen. "It's an impressive achievement
that an outsider can have so much influence, and has even been given an
institutional base for his influence."

Perle's authority in the Bush Administration is buttressed
by close association, politically and personally, with many important Administration
figures, including Wolfowitz and Douglas Feith, the Under-Secretary of
Defense for Policy, who is the Pentagon's third-ranking civilian official.
In 1989, Feith created International Advisors Incorporated, a lobbying
firm whose main client was the government of Turkey. The firm retained
Perle as an adviser between 1989 and 1994. Feith got his current position,
according to a former high-level Defense Department official, only after
Perle personally intervened with Rumsfeld, who was skeptical about him.
Feith was directly involved in the strategic planning and conduct of the
military operations against the Taliban in Afghanistan; he now runs various
aspects of the planning of the Iraqi war and its aftermath. He and Perle
share the same views on many foreign-policy issues. Both have been calling
for Saddam Hussein's removal for years, long before September 11th. They
also worked together, in 1996, to prepare a list of policy initiatives
for Benjamin Netanyahu, shortly after his election as the Israeli Prime
Minister. The suggestions included working toward regime change in Iraq.
Feith and Perle were energetic supporters of Ahmad Chalabi, the controversial
leader of the anti-Saddam Iraqi National Congress, and have struggled with
officials at the State Department and the C.I.A. about the future of Iraq.

Perle has also been an outspoken critic of the Saudi
government, and Americans who are in its pay. He has often publicly rebuked
former American government officials who are connected to research centers
and foundations that are funded by the Saudis, and told the National Review
last summer, "I think it's a disgrace. They're the people who appear
on television, they write op-ed pieces. The Saudis are a major source of
the problem we face with terrorism. That would be far more obvious to people
if it weren't for this community of former diplomats effectively working
for this foreign government." In August, the Saudi government was
dismayed when the Washington Post revealed that the Defense Policy Board
had received a briefing on July 10th from a Rand Corporation analyst named
Laurent Murawiec, who depicted Saudi Arabia as an enemy of the United States,
and recommended that the Bush Administration give the Saudi government
an ultimatum to stop backing terrorism or face seizure of its financial
assets in the United States and its oil fields. Murawiec, it was later
found, is a former editor of the Executive Intelligence Review, a magazine
controlled by Lyndon H. LaRouche, Jr., the perennial Presidential candidate,
conspiracy theorist, and felon. According to Time, it was Perle himself
who had invited Murawiec to make his presentation.

Perle's hostility to the politics of the Saudi government
did not stop him from meeting with potential Saudi investors for Trireme.
Khashoggi and Zuhair told me that they understood that one of Trireme's
objectives was to seek the help of influential Saudis to win homeland-security
contracts with the Saudi royal family for the businesses it financed. The
profits for such contracts could be substantial. Saudi Arabia has spent
nearly a billion dollars to survey and demarcate its eight-hundred-and-fifty-mile
border with Yemen, and the second stage of that process will require billions
more. Trireme apparently turned to Adnan Khashoggi for help.

Last month, I spoke with Khashoggi, who is sixty-seven
and is recovering from open-heart surgery, at his penthouse apartment,
overlooking the Mediterranean in Cannes. "I was the intermediary,"
he said. According to Khashoggi, he was first approached by a Trireme official
named Christopher Harriman. Khashoggi said that Harriman, an American businessman
whom he knew from his jet-set days, when both men were fixtures on the
European social scene, sent him the Trireme pitch letter. (Harriman has
not answered my calls.) Khashoggi explained that before Christmas he and
Harb Zuhair, the Saudi industrialist, had met with Harriman and Gerald
Hillman in Paris and had discussed the possibility of a large investment
in Trireme.

Zuhair was interested in more than the financial side;
he also wanted to share his views on war and peace with someone who had
influence with the Bush Administration. Though a Saudi, he had been born
in Iraq, and he hoped that a negotiated, "step by step" solution
could be found to avoid war. Zuhair recalls telling Harriman and Hillman,
"If we have peace, it would be easy to raise a hundred million. We
will bring development to the region." Zuhair's hope, Khashoggi told
me, was to combine opportunities for peace with opportunities for investment.
According to Khashoggi, Hillman and Harriman said that such a meeting could
be arranged. Perle emerged, by virtue of his position on the policy board,
as a natural catch; he was "the hook," Khashoggi said, for obtaining
the investment from Zuhair. Khashoggi said that he agreed to try to assemble
potential investors for a private lunch with Perle.

The lunch took place on January 3rd at a seaside restaurant
in Marseilles. (Perle has a vacation home in the South of France.) Those
who attended the lunch differ about its purpose. According to both Khashoggi
and Zuhair, there were two items on the agenda. The first was to give Zuhair
a chance to propose a peaceful alternative to war with Iraq; Khashoggi
said that he and Perle knew that such an alternative was far-fetched, but
Zuhair had recently returned from a visit to Baghdad, and was eager to
talk about it. The second, more important item, according to Khashoggi
and Zuhair, was to pave the way for Zuhair to put together a group of ten
Saudi businessmen who would invest ten million dollars each in Trireme.

"It was normal for us to see Perle," Khashoggi
told me. "We in the Middle East are accustomed to politicians who
use their offices for whatever business they want. I organized the lunch
for the purpose of Harb Zuhair to put his language to Perle. Perle politely
listened, and the lunch was over." Zuhair, in a telephone conversation
with me, recalled that Perle had made it clear at the lunch that "he
was above the money. He said he was more involved in politics, and the
business is through the company"-Trireme. Perle, throughout the lunch,
"stuck to his idea that 'we have to get rid of Saddam,'" Zuhair
said. As of early March, to the knowledge of Zuhair, no Saudi money had
yet been invested in Trireme.

In my first telephone conversation with Gerald Hillman,
in mid-February, before I knew of the involvement of Khashoggi and Zuhair,
he assured me that Trireme had "nothing to do" with the Saudis.
"I don't know what you can do with them," he said. "What
we saw on September 11th was a grotesque manifestation of their ideology.
Americans believe that the Saudis are supporting terrorism. We have no
investment from them, or with them." (Last week, he acknowledged that
he had met with Khashoggi and Zuhair, but said that the meeting had been
arranged by Harriman and that he hadn't known that Zuhair would be there.)
Perle, he insisted in February, "is not a financial creature. He doesn't
have any desire for financial gain."

Perle, in a series of telephone interviews, acknowledged
that he had met with two Saudis at the lunch in Marseilles, but he did
not divulge their identities. (At that time, I still didn't know who they
were.) "There were two Saudis there," he said. "But there
was no discussion of Trireme. It was never mentioned and never discussed."
He firmly stated, "The lunch was not about money. It just would never
have occurred to me to discuss investments, given the circumstances."
Perle added that one of the Saudis had information that Saddam was ready
to surrender. "His message was a plea to negotiate with Saddam."

When I asked Perle whether the Saudi businessmen at the
lunch were being considered as possible investors in Trireme, he replied,
"I don't want Saudis as such, but the fund is open to any investor,
and our European partners said that, through investment banks, they had
had Saudis as investors." Both Perle and Hillman stated categorically
that there were currently no Saudi investments.

Khashoggi professes to be amused by the activities of
Perle and Hillman as members of the policy board. As Khashoggi saw it,
Trireme's business potential depended on a war in Iraq taking place. "If
there is no war," he told me, "why is there a need for security?
If there is a war, of course, billions of dollars will have to be spent."
He commented, "You Americans blind yourself with your high integrity
and your democratic morality against peddling influence, but they were
peddling influence."

When Perle's lunch with Khashoggi and Zuhair, and his
connection to Trireme, became known to a few ranking members of the Saudi
royal family, they reacted with anger and astonishment. The meeting in
Marseilles left Perle, one of the kingdom's most vehement critics, exposed
to a ferocious counterattack.

Prince Bandar bin Sultan, who has served as the Saudi
Ambassador to the United States for twenty years, told me that he had got
wind of Perle's involvement with Trireme and the lunch in Marseilles. Bandar,
who is in his early fifties, is a prominent member of the royal family
(his father is the defense minister). He said that he was told that the
contacts between Perle and Trireme and the Saudis were purely business,
on all sides. After the 1991 Gulf War, Bandar told me, Perle had been involved
in an unsuccessful attempt to sell security systems to the Saudi government,
"and this company does security systems." (Perle confirmed that
he had been on the board of a company that attempted to make such a sale
but said he was not directly involved in the project.)

"There is a split personality to Perle," Bandar
said. "Here he is, on the one hand, trying to make a hundred-million-dollar
deal, and, on the other hand, there were elements of the appearance of
blackmail-'If we get in business, he'll back off on Saudi Arabia'-as I
have been informed by participants in the meeting."

As for Perle's meeting with Khashoggi and Zuhair, and
the assertion that its purpose was to discuss politics, Bandar said, "There
has to be deniability, and a cover story-a possible peace initiative in
Iraq-is needed. I believe the Iraqi events are irrelevant. A business meeting
took place."

Zuhair, however, was apparently convinced that, thanks
to his discussions with Trireme, he would have a chance to enter into a
serious discussion with Perle about peace. A few days after the meeting
in Paris, Hillman had sent Khashoggi a twelve-point memorandum, dated December
26, 2002, setting the conditions that Iraq would have to meet. "It
is my belief," the memorandum stated, "that if the United States
obtained the following results it would not go to war against Iraq."
Saddam would have to admit that "Iraq has developed, and possesses,
weapons of mass destruction." He then would be allowed to resign and
leave Iraq immediately, with his sons and some of his ministers.

Hillman sent Khashoggi a second memorandum a week later,
the day before the lunch with Perle in Marseilles. "Following our
recent discussions," it said, "we have been thinking about an
immediate test to ascertain that Iraq is sincere in its desire to surrender."
Five more steps were outlined, and an ambitious final request was made:
that Khashoggi and Zuhair arrange a meeting with Prince Nawaf Abdul Aziz,
the Saudi intelligence chief, "so that we can assist in Washington."

Both Khashoggi and Zuhair were skeptical of the memorandums.
Zuhair found them "absurd," and Khashoggi told me that he thought
they were amusing, and almost silly. "This was their thinking?"
he recalled asking himself. "There was nothing to react to. While
Harb was lobbying for Iraq, they were lobbying for Perle."

In my initial conversation with Hillman, he said, "Richard
had nothing to do with the writing of those letters. I informed him of
it afterward, and he never said one word, even after I sent them to him.
I thought my ideas were pretty clear, but I didn't think Saddam would resign
and I didn't think he'd go into exile. I'm positive Richard does not believe
that any of those things would happen." Hillman said that he had drafted
the memorandums with the help of his daughter, a college student. Perle,
for his part, told me, "I didn't write them and didn't supply any
content to them. I didn't know about them until after they were drafted."

The views set forth in the memorandums were, indeed,
very different from those held by Perle, who has said publicly that Saddam
will leave office only if he is forced out, and from those of his fellow
hard-liners in the Bush Administration. Given Perle's importance in American
decision-making, and the risks of relying on a deal-maker with Adnan Khashoggi's
history, questions remain about Hillman's drafting of such an amateurish
peace proposal for Zuhair. Prince Bandar's assertion-that the talk of peace
was merely a pretext for some hard selling-is difficult to dismiss.

Hillman's proposals, meanwhile, took on an unlikely life
of their own. A month after the lunch, the proposals made their way to
Al Hayat, a Saudi-owned newspaper published in London. If Perle had ever
intended to dissociate himself from them, he did not succeed. The newspaper,
in a dispatch headlined "washington offers to avert war in return
for an international agreement to exile saddam," characterized Hillman's
memorandums as "American" documents and said that the new proposals
bore Perle's imprimatur. The paper said that Perle and others had attended
a series of "secret meetings" in an effort to avoid the pending
war with Iraq, and "a scenario was discussed whereby Saddam Hussein
would personally admit that his country was attempting to acquire weapons
of mass destruction and he would agree to stop trying to acquire these
weapons while he awaits exile."

A few days later, the Beirut daily Al Safir published
Arabic translations of the memorandums themselves, attributing them to
Richard Perle. The proposals were said to have been submitted by Perle,
and to "outline Washington's future visions of Iraq." Perle's
lunch with two Saudi businessmen was now elevated by Al Safir to a series
of "recent American-Saudi negotiations" in which "the American
side was represented by Richard Perle." The newspaper added, "Publishing
these documents is important because they shed light on the story of how
war could have been avoided." The documents, of course, did nothing
of the kind.

When Perle was asked whether his dealings with Trireme
might present the appearance of a conflict of interest, he said that anyone
who saw such a conflict would be thinking "maliciously." But
Perle, in crisscrossing between the public and the private sectors, has
put himself in a difficult position-one not uncommon to public men. He
is credited with being the intellectual force behind a war that not everyone
wants and that many suspect, however unfairly, of being driven by American
business interests. There is no question that Perle believes that removing
Saddam from power is the right thing to do. At the same time, he has set
up a company that may gain from a war. In doing so, he has given ammunition
not only to the Saudis but to his other ideological opponents as well.